Haven assets in demand in Asia after North Korea missile launch

What you need to know

S Korea’s Kospi down as much as 1.1 per cent after N Korea missile launch

Market jitters buoy haven assets including yen, Swiss franc and gold

Australia’s stock benchmark slips into negative territory for year

Gasoline, crude oil prices climb as Harvey drenches Texas coastline

Overview

Asia-Pacific equities were in retreat as the latest missile launch by North Korea frayed nerves in the region, with heightened geopolitical tensions boosting the yen and gold. Gasoline and crude oil prices were rising as Tropical Storm Harvey continued to batter Houston.

Hot topic

The launch by North Korea of a ballistic missile that flew over Japan rattled markets and sent investors in Asia in search of havens.

Equities suffered, with Seoul’s Kospi Composite index dropping as much as 1.1 per cent following the launch. Samsung Electronics lost as much as 2 per cent, taking losses to 4.6 per cent since Friday, when heir-apparent Lee Jae-yong was sentenced to five years in jail on corruption charges.

Havens were on the upswing following the missile launch, with the Japanese yen strengthening against the US dollar to an intraday high of ¥108.34, its firmest level since mid-April. The Swiss franc touched an intraday high of SFr0.95 per dollar, up 0.6 per cent. Gold climbed as much as 0.9 per cent in Asia trading to $1,322.41 an ounce, its highest level since November 9.

The yen’s gains translated to losses for Japanese financial stocks, with the sector down 0.7 per cent. The Topix index was down 0.4 per cent in Tokyo.

Heightened tensions in the region also boosted bond prices, pushing down the yield (which moves in the opposite direction) on the 10-year US Treasury by 3 basis points to 2.129 per cent. However, the yield on the equivalent South Korean bond was up 2bp at 2.251 per cent.

Equities

In Sydney the S&P/ASX 200 retreated as much as 1 per cent, erasing gains for the year and pushing the index down 0.1 per cent for the year to date. Commonwealth Bank of Australia was the worst performer among the country’s major banks, sliding as much as 1.8 per cent after Credit Suisse slashed its target price for the bank amid an escalating money laundering scandal.

In Hong Kong the Hang Seng was down 0.4 per cent, led by a 0.6 per cent drop in financials.

Commodities

With Tropical Storm Harvey still drenching the Texas coastline, the price of gasoline was up 1.2 per cent at $1.732 a gallon. On Monday it rose as far as $1.7799, the highest price since July 2015.

Oil prices were also on the rise, with Brent crude, the international benchmark, up 0.4 per cent at $52.08 a barrel. West Texas Intermediate, the US marker, was up 0.5 per cent at $46.82 a barrel.

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